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The dream of establishing smartphone “super apps” that can operate across Africa’s markets is galvanising Chinese investment into Nigeria.
Nigeria, with about 220mn people, is the continent’s most populous country and its biggest economy. So, when two Chinese-backed fintech companies hatched ambitions to build African versions of Chinese mobile payment giants Alipay or WeChat Pay, they decided to start in Lagos.
“[We are building] a very, very super app,” says Chika Nwosu, managing director of PalmPay, one of the Chinese-backed mobile payments start-ups. “Nigeria is the hub for business in Africa.” Also open for business in Ghana, PalmPay has seen its active users grow fivefold to 25mn over the past year and plans to expand to Kenya, Uganda and Tanzania, Nwosu says.
So-called super apps aim to be one-stop shops for a range of services, and PalmPay’s offering through its smartphone app is increasingly comprehensive. Users in Nigeria can pay utility bills, top up mobile phone accounts, pay about 500,000 merchants for a variety of goods and services, make bank transfers, arrange loans, receive money and perform a host of other transactions.
Nigerians are able to conduct about 80 per cent of their financial lives through the PalmPay app on their phones, according to Nwosu. By early next year, he says, new features will increase this to “100 per cent”.
The boldness of such a model, combined with the successful examples of Asian super apps, has drawn strong backing from international investors and fomented an intense competition for market share that is helping to drive a digital revolution.
PalmPay is backed by Transsion, a Chinese mobile phone company that dominates Africa’s smartphone market, plus Chinese internet company NetEase, Taiwanese chipmaker MediaTek, and a clutch of Chinese funds.
Its main rival, OPay, was valued at $2bn when it raised $400mn in 2021 from Chinese investors and SoftBank Vision Fund 2. OPay chief Yahui Zhou, a top web game developer, said “financial inclusion” was his goal when he announced a strategic partnership last year with Mastercard in several countries in Africa and the Middle East.
In Nigeria, where the World Bank says 64 per cent of adults remain unbanked, most people still pay by cash. But, with smartphones available in Lagos shops for as little as $50, people are increasingly making cashless transactions.
Almost all of Transsion’s smartphones — which bear the bestselling Tecno, Infinix and Itel brands — are sold with the PalmPay app pre-installed, giving the app immediate traction.
PalmPay and OPay’s decision to focus on Nigeria gives a sense of the importance that Chinese companies attach to the country’s potential. It became one of the top five Chinese investment destinations in Africa in 2020, after Kenya, South Africa, the Democratic Republic of Congo and Ethiopia, according to Merics, a Berlin-based think-tank focused on China.
The cumulative value of Chinese foreign direct investment into Nigeria by 2021 was more than $20bn, according to Cui Jianchun, China’s ambassador to Nigeria. He cites the Abuja-Kaduna and Lagos-Ibadan railways, new airport terminals, the Lekki deep water port and Zungeru hydropower station as key infrastructure projects financed by Chinese state banks.
The finance they offer helps Chinese companies win crucial contracts. For instance, Huawei, the Chinese telecommunications giant, is dominating the installation of 5G telecoms base stations after MTN, the South African mobile operator, chose to roll out 5G services in the country using Huawei equipment.
However, the position that Huawei holds in basic telecoms infrastructure, coupled with the popularity of PalmPay and OPay super apps, has raised concerns among some Nigerian officials over potential future Chinese dominance in digital infrastructure and data.
“We always need to be pragmatic to balance Chinese influence,” says one government official, who declined to be identified. “Chinese loans to the government have been growing and there is always secrecy. We need to be careful.”
Such statements urging caution are joined by others highlighting Chinese resourcefulness. “The Chinese are pretty relentless,” says a senior Nigerian banker, who asked not to be identified. “They have delivered a lot of important infrastructure projects for us.”
This resourcefulness was on display at the Lagos Motor Fair held at the Federal Palace hotel in Lagos in June, where scores of exhibitors promoted auto parts to Nigerian customers. Almost all stalls were taken by Chinese companies and, at most counters, salespeople who had flown in from China told roughly the same story of starting small and growing businesses in Nigeria, patiently, from the grassroots.
“We don’t have more than a few clients in Nigeria,” said Chen Xiaoling of Zhejiang Gold Intelligent Suspension Corp, which already sells car parts in Egypt, Morocco, Algeria and South Africa. “The middle class here is not yet large but we have to prepare for one day when the market starts to mature.”
The only sign of US presence at the show was a large Ford pick-up truck parked near the entrance. No sales executive appeared on hand to explain Ford’s approach to the market.
